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Clay County Commission sues Auditor Galloway over petition audit scope

Clay County Commission sues Auditor Galloway over petition audit scope

February 10th, 2019 by Bob Watson in Local News

The Clay County Commission thinks State Auditor Nicole Galloway is violating the Missouri Constitution with the way she's doing her audit of the county government's operations.

The Clay County Commission filed a lawsuit in Cole County Circuit Court on Jan. 31, then amended it last Monday.

In the amended lawsuit, the Clay County Commission argues Galloway's efforts to do a "performance" audit of the county's operations go beyond her constitutional authority.

"The constitutional command that the Auditor conduct all audits or investigations 'required by law' is limited to those 'related to the supervising and auditing of the receipt and expenditure of public funds,'" the commission's attorney, William Joseph Hatley of the Spencer Fane law firm's Kansas City office, wrote, pointing to the last line of the Missouri Constitution's authorization for the auditor's position.

The complete paragraph — broken into several paragraphs here for easier reading — says: "The state auditor shall have the same qualifications as the governor" — which means he or she must "be at least 30 years old and shall have been a citizen of the United States for at least 15 years."

There also is a 10-year residency requirement, but a 1972 state Supreme Court ruling (in a case challenging Christopher Bond's candidacy for the governor's office) said that requirement doesn't mean the auditor must have lived in the state for 10 straight years.

The rest of the paragraph says: "He shall establish appropriate systems of accounting for all public officials of the state, post-audit the accounts of all state agencies and audit the treasury at least once annually.

"He shall make all other audits and investigations required by law, and shall make an annual report to the governor and general assembly.

"He shall establish appropriate systems of accounting for the political subdivisions of the state, supervise their budgeting systems, and audit their accounts as provided by law.

"No duty shall be imposed on him by law which is not related to the supervising and auditing of the receipt and expenditure of public funds."

The Clay County Commission lawsuit's main argument is the state laws that further define the auditor's powers can't go beyond the Constitution's limit of "supervising and auditing of the receipt and expenditure of public funds."

Although Assistant Attorney General Joel Ellis Anderson has entered the case to represent Galloway, the state has not yet filed its legal arguments against the Clay County lawsuit.

But, in a Feb. 1 news release issued after the lawsuit first was filed, Steph Deidrick, Galloway's spokeswoman, said: "The Auditor is confident in her legal authority."

Galloway also has said the findings of any audit can be useful to other governments — such as New Bloomfield, which also is getting a state audit after its residents petitioned for one.

Chapter 29 of Missouri's Revised Statutes details the procedures the auditor must follow in operating the office and doing audits.

The law's definition of an "audit" says it is an "independent, objective assessment of the stewardship, performance, or cost of government policies, programs, or operations, depending upon the type and scope of the audit.

"All audits shall conform to the standards established by the comptroller general of the United States for audits of government entities, organizations, programs, activities, and functions as presented in the publication Government Auditing Standards"

Galloway's Clay County audit is being done because county residents asked for it.

Deidrick told the News Tribune last week: "The petitioners' concerns as provided on the petition audit request form are confidential"

But the sponsors of that petition have been vocal about their reasons, telling the Clay County Courier-Tribune they were concerned "about wasteful spending, lack of transparency and unresponsiveness to those concerns from county officials."

More than 9,000 people signed the petitions — only 5,590 valid signatures from registered county voters were needed to initiate the state audit, which Galloway has estimated will cost up to $150,000.

Under the law allowing the auditor to do petition audits, the local government being audited must pay the "actual cost of the audit."

And that's part of the county officials' concerns.

Eastern District Clay County Commissioner Luann Ridgeway — a former state representative and senator — told the Clay County newspaper the prospect of a state audit was a "financial hall of horrors for our taxpayers."

She worried the final cost could go much higher than Galloway's estimate.

But the Clay County Commission filed its lawsuit only after Galloway served the county with a subpoena for records the county refused to turn over — including minutes of the commission's closed sessions.

Citing a 1997 state Supreme Court ruling, the commission argued: "The Auditor's business is limited to the review of financial transactions of the public body being audited and does not extend to 'management audits.'"

The commission added: "While (state law) authorizes the Auditor to require the production of 'necessary papers, documents and writings,' she does not require all closed session minutes, including those reflecting privileged communications with the Commission's attorney, to audit the County's receipt and expenditure of public funds.

"At best, the Auditor is seeking access to the Commission's attorney-client communications to conduct a management or performance audit of the County. Such an audit exceeds the Auditor's constitutionally prescribed powers."

But, Galloway said in a news release: "Within the first six weeks of this process, my team has encountered delays, roadblocks and evasive responses that make it challenging to complete audit work in a cost-effective way on behalf of the taxpayers of Clay County. My auditors are requesting basic information, and there is no reason why it should be this difficult.

"Citizens asked for an audit of their government because they wanted answers about the operations of their county.

"I will use the full authority of my office to ensure they get the answers they deserve."

Galloway said the information her field auditors asked for "is commonly requested during the audit process. Within the past two years, the State Auditor's Office has completed more than 40 comprehensive county performance audits in which the same basic information was provided to auditors, without the need for a subpoena."

After the Clay County Commission filed its lawsuit, attorneys for both sides filed a joint motion, agreeing the subpoena — though still active — would not be enforced.

Meanwhile, Deidrick said, the audit is continuing without the records Galloway sought with the subpoena.

The lawsuit was assigned to Cole County Circuit Judge Jon Beetem.

No hearings have been scheduled, yet.